Since the recent changes to the national pension system in April 2015, there has been a worrying rise in the number of ‘pension liberation’ scams. Using the guise of an early pension release scheme, these fraudulent companies encourage individuals to withdraw money from their pension funds before they turn 55.
Although the process of an early pension release is legal, the tax avoidance methods promised by these fraudulent companies are not. As such, unsuspecting victims withdraw funds from their pension pot and end up having to pay upwards of 55% in tax charges to HMRC. What’s more, the companies who operate these pension liberation scams will often place your pension funds in unregulated offshore investments. These high risk investment structures result in little to no return on your investment and in worst case scenarios innocent victims of pension liberation scams have lost their entire life savings!
To ensure that you do not fall victim to these types of fraudulent schemes, listed below are several methods that you can adopt to identify and report potential pension liberation scams;
Scrutinise their marketing methods
First and foremost, if you are approached by a pension liberation organisation then you should scrutinise the way in which they contacted you. Fraudulent companies rely upon marketing methods such as cold calling your home and bombarding you with spam texts and emails. If you have received these types of messages accompanied with promises of ‘an early pension release’, and high value investments into timeshares, carbon countries, or other ‘lucrative overseas opportunities’ then you should proceed with extreme caution.
Unsubstantial contact details
A clear method of assessing whether a pension firm is fraudulent is to analyse their company contact details. Many of these organisations will encourage you to invest in their schemes and divulge all of your personal banking information without providing you with anything more than their website, mobile phone number or a suspect PO Box address. Even if you are presented with a physical address, pension fraud consumer guides advise that you investigate the fine print of these contact details online. In many cases, this physical address will actually be a ‘virtual’ office address which is another clear indicator of a pension liberation scam.
Illegal or unrealistic promises
Above all else, the primary indicator of a pension liberation scheme is a scam is the promise of ‘legal loopholes’. If you have been contacted by a pension firm who try to convince you that you can withdraw money from your pension pot before the age of 55 without paying any tax charges then it is definitely a scam. Moreover, if they use terminology such as ‘legal loopholes’ or try to entice you with promises of lump sum cash incentives or ‘profitable offshore investment opportunities’ then it is a scam. These types of fraudulent firms will transfer your pension funds into a high risk offshore investment structure without any guarantee or insurance policy that you will receive your pension back should the investment fall through.
Ultimately, if you suspect that you have been propositioned by a fraudulent pension liberation firm then you should refrain from divulging any of your personal information to them and immediately seek to verify their company credentials with the Financial Conduct Authority; a official authoritative body who will direct you to a catalogue of identified pension scammers. You can also report all potential pension liberation scams to Action Fraud. By doing so, you can help to prosecute these fraudulent organisations, safeguard your pension pot, and prevent these unscrupulous companies from scamming other unsuspecting individuals out of their life savings!